1. The Concept of "TACO Trading"

The concept of "TACO" was first proposed by Financial Times columnist Robert Armstrong in May this year, standing for "Trump Always Chickens Out." This concept stems from U.S. President Trump's typical policy style, where he often creates negotiation leverage through tough rhetoric or radical measures on issues like trade and tariffs, thereby generating political pressure and public opinion momentum; however, when market volatility intensifies or the economy comes under pressure, he quickly softens his stance to avoid substantial impacts on the economic fundamentals. This pattern of applying pressure followed by concessions has gradually formed a predictable policy cycle in the market and has become an important clue for understanding the rhythm of Trump's policies and their market impact.
Based on this logic, "TACO trading" is defined as a speculative strategy centered around policy changes, with its core being the identification of short-term coordination between political signals and market prices. "TACO trading" typically presents a complete cycle of policy signal triggering, market reaction amplification, and emotional repair convergence. The process often begins with the release of strong policy signals on political issues, such as announcing tariffs, export controls, or sanctions, which quickly drives up market risk premiums and triggers uncertainty; subsequently, the market completes a repricing in a short period, with leveraged and derivative positions being passively liquidated, leading to a sharp decline in asset prices; when the policy tone shifts to pragmatism or signs of compromise emerge, market confidence gradually recovers, risk appetite rebounds, and capital flows back in, thus completing the cycle from emotional selling to rational repair. It is worth noting that "TACO trading" often exhibits significant temporal and rhythmic characteristics. Tough signals are often released on weekends or at night, creating price gaps and emotional shocks through liquidity voids, while softer statements usually appear on weekdays to guide expectations back to stability and repair market sentiment.

Source: tradosaure

2. The Crypto Link Triggered by "TACO Trading"

As the logic of "TACO trading" continues to manifest in the market, its impact has transcended traditional assets, particularly evident in the crypto market. For instance, on October 10, U.S. President Trump announced on Truth Social his plan to impose an additional 100% tariff on Chinese exports and requested the Commerce Department to implement export controls on key Chinese software and rare earth-related products by November 1. This sudden statement was viewed by the market as the biggest shift in U.S.-China trade policy since 2020, leading to a repricing of "global supply chain disruption risks." Consequently, U.S. stock futures plummeted, with the Dow Jones index falling by 1.9% and the Nasdaq dropping by 3.6%. However, just two days later, the White House's tone shifted significantly. On October 12, Trump emphasized in a speech that he "hopes to resolve differences through cooperation," and U.S. Vice President Pence stated that "the tariff plan is still under evaluation." On October 13, the Dow Jones index rebounded by 1.3%, and the Nasdaq bounced back by 1.6%, with market risk appetite quickly recovering. The rhythm from tough pressure to soft repair once again confirmed the characteristics of "TACO trading," creating short-term panic through political signals and then releasing a trading rebound through corrections.
Compared to traditional assets, the cryptocurrency market exhibited higher sensitivity and amplification effects during this "TACO trading" cycle. Due to its high leverage structure, continuous trading mechanism, and liquidity-driven characteristics, crypto assets became the first responders to policy uncertainty. On October 11, Bitcoin's price plummeted from a high of $114,500 to $104,800, with a single-day decline of over 8%; Ethereum briefly fell below $4,000. The "October 11 crash" also became the largest liquidation event in cryptocurrency history, with forced liquidations across the market reaching $19 billion, and major exchanges triggering automatic deleveraging mechanisms, causing funding rates to drop to their lowest levels since the end of the 2022 bear market. As the policy tone softened and risk sentiment repaired on October 12, Bitcoin rebounded above $115,000, and Ethereum returned to $4,100. This indicates that the crypto market is becoming the most emotionally elastic market in the "TACO trading" chain. Its price fluctuations not only synchronize with the risk premium adjustments of traditional markets but also deepen the impact of policy signals on the market through emotional feedback.

Source: tradingview

3. The Gray Boundaries of "TACO Trading"

Following the intense volatility triggered by "TACO trading," the market began to focus on the hidden dangers behind it. Was this crash a natural reaction to policy expectations, or a carefully designed liquidity trap by specific capital groups? On-chain analyst Eye pointed out that there were significant anomalies in short-selling behavior before the crash. Subsequent exposure of on-chain transaction records and associated wallets further corroborated this analysis. Between October 8 and 9, a whale account named Garrett Jin sold approximately 35,000 Bitcoins on the Hyperliquid platform over two consecutive days while simultaneously establishing a $735 million BTC perpetual short position. From the evening of October 10 to the early morning of October 11, quantitative strategies on major platforms like Hyperliquid and Binance triggered risk control thresholds, causing the total liquidation amount across the network to surge to $9 billion within an hour, becoming the direct catalyst for the "October 11 crash." On-chain tracking further revealed that the funds associated with large short positions were deliberately split before the operation and repeatedly transferred through multiple addresses. A few hours later, some of the funds flowed back into multiple Binance deposit accounts. Among these transfer paths, one was confirmed to flow to the Ethereum domain name ereignis.eth, with the address activity time highly coinciding with the aforementioned account, indicating that these funds likely originated from the same controlling party.
Recent developments further reveal the complexity of the gray areas of "TACO trading." Eye stated that Garrett Jin may only be an agent, and the informant may not have directly provided information to him but rather relayed it through intermediaries, with these key information sources coming from insiders who have access to the U.S. presidential staff. Analysis suggests that the core operators are suspected to be Zach Witkoff and Chase Herro (both co-founders of Trump family crypto project World Liberty Financial), who are believed to have utilized information in advance to organize internal trading groups to establish highly advantageous positions before policy announcements, thereby amplifying market volatility. Eye even hinted that Trump's eldest son might also be involved. On October 14, Eye stated that he would stop further disclosures for personal safety reasons, but this is enough to indicate that when policy expectations become tradable signals, the boundary between the crypto market and power information is quietly being broken.

Source: @eyeonchains

4. The Double-Edged Nature of "TACO Trading"

The rise of "TACO trading" essentially reflects a self-adaptive pricing mechanism formed in an environment where the market is policy-driven and fundamentals take a back seat. Investors increasingly base their judgments on policy signals, with policies gradually replacing economic data as the primary variable influencing asset prices. Whether it is interest rate expectations, regulatory attitudes, or geopolitical statements, they are quickly transformed into trading actions. The crypto market, due to its continuous trading hours, strong liquidity, and responsive nature, has become a real-time radar for policy expectations. This indeed enhances the market's response efficiency but also brings structural issues. The correlation between prices and real economic activities has weakened, and trading resembles betting on policy shifts rather than the fundamental value of agreements.
A deeper risk lies in the implicit premise of "TACO trading" that policies will ultimately return to stability. However, when the market generally bets on a return, trading behavior itself may reverse influence policymakers' judgments through price signals, thereby amplifying volatility and uncertainty. For the crypto market, which has high leverage levels and sensitive liquidation mechanisms, this feedback loop is particularly dangerous and could even evolve into systemic liquidity risks. In this sense, "TACO trading" is both a strategic framework and a mirror reflecting market behavior. In such an environment, investors may need to pay more attention to liquidity safety and the elasticity of risk exposure while recognizing that true competitiveness lies not in predicting the speed of policy shifts but in maintaining robustness and adaptability amid policy uncertainty.